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xkl plans a new project that will generate 187000 of continious cash flow each year for...

xkl plans a new project that will generate 187000 of continious cash flow each year for 8 years and additionally 108000 at the end of the project . if the continiously compounded rate of interest is 4 % estimate the pressent value of the cash flows

answer is 1,358,677.35

but details on how i get there please no excel

Solutions

Expert Solution

Annuity for 8 years = 187,000

Interest rate = 4%

PV of annuity (equal cash flow) = Annuity*PVIFA(4%,8)

                                              = 187,000*6.7327 (PVIFA value is taken from the PVIFA table)

                                              = = 1,259,014.90

Now, PV of additional cash receipt = 108,000 / 1.04^8

                                                   = 108,000 / 1.3686 = 78,914.54

Total PV = 1,259,014.90 + 78,914.54

             = 1,337,929.44

                                                 

jeff jeffy answered 2 hours ago
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